What are Bad Debts, Solvent and Insolvent?

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What are Bad Debts, Solvent and insolvent? What is Solvent A person who is capable to pay its debt (or liability) is calld Solvent Example My Company Sold goods to A for Rs 10000 on Credit If A pays this 10000 to us,it means A is solvent What is Insolvent A person who is not in position to pay his debt (or liability) is calld Insolvent Example My Company Sold goods to A for Rs 10000 on Credit If A becomes bankrupt and does not pay this 10000 to us it means A is insolvent What is Bad Debts? It is a debt which is not recoverable In easy language,If any amount due from debtors is not paid by debtors,it is called Bad Debts Example My Company Sold goods to A for Rs 10000 on Credit If A becomes bankrupt and does not pay this 10000 to us So Rs 10000 is Bad debts for us Example - Bad Debts Calculation Sales RS 10000 My Company A In This Balance sheet case. Liabilities Amt Assets Amt A is Debtors 10000 our Debtor for Rs 10000 Suppose A makes Payment No Bad Debts of Rs 10000 Suppose A makes Payment 6000 Bad Debts of Rs 4000 (Expense) Suppose A does not Rs 10000 Bad Debts make Payment (Expense) Type of Debtor Solvent Insolvent Person who is capable Person who is not capable to pay its debt in position to pay its debt its debt Person Pays full Person Pays less amount amount No Bad Debts Bad debts